DC Pensions Update | November 2018

In this November DC Pensions Update, we look at collective defined contribution pensions and how they will operate in the UK. Also, Alison Hatcher of HSBC Global Asset Management joins us to discuss opt outs and how to stop them increasing once contributions rise to 8% in April.

This is dc pensions news to me, jenny alice. In this bulletin, how collective defined contribution pensions will operate in the uk on what khun schemes due to stop people opting out of auto enrollment wants contribution levels. Rise to eight percent in april, but first the imf has said a people need to work into their seventies and has called for changes in the uk pension system. To recognize that people are now living longer, it won. The uk is not making enough provisions for health and pensions in the future. Currently, the majority of men and women qualify for a state pension at sixty five. But that's due to rise to sixty six by two thousand twenty and then sixty seven by two thousand. Twenty eight have worn further increases may be required raising the prospect that britons will have to work into their seventies before retiring in other news on dh, you have until january sixteenth to let the government know your views on collective dc pension schemes. The consultation has been prompted by the royal melon communication workers union, putting forward their own plans for a cdc star pension scheme for the workforce. Tom selby, senior unlisted age. A bell say given the sheer size of the royal mail as an employer is the man for cdc was always likely to grab government's attention. But it's not clear whether other employers will follow suit. There's a link to the consultation below the player. I'm joined now by alison hatcher, part of the global client strategy team at hsbc global asset management. Allison, the d w p now considers to be a systemic risk to pension schemes. What obligation says that put on trustees. What's really interesting is that the deed of bp have recognized that there is a lack of consistency, both within policies and processes, but also it's just a very confusing market. The moment with variety of funds so what they're. Dinos have stepped in because they want to help trustees helped them with some guidance and help them understand. Not just the long term financial risks of sg and the impact on the portfolio. But also how they can manage those risks and what they've done is they've created some new obligations on the trustees and sounds, so there's some new legislation on that's divided into multiple different areas. The first one is that by the first of october, two thousand nineteen so there's a nice period of time to get this in order, the trustees are to create some policies of how they're going to think about the financial and material impact or v s g on their portfolio on this financial material impact is a very important statement because it is in essence saying that long term well governed and well managed. Companies will outperform those that are not, and it's helping to trustees to understand that this is actually a long term risk, and it's good governance. They then have to look at the policies that they have in place around stewardship around voting and also around asset managers off the money. Because it's not just good enough that they outsource the responsibility. They have to make sure that those asset managers or governing the risks in the right way. Then as off the october two thousand nineteen, they will have to make this public and put it online, which is lovely martin on the same time they will have to create, say a roadmap of how they're going to implement some of these policies. And i think that's really important because it's not just about having the policy is about how they're. Goingto implement it, and this is on their overall portfolio, but specifically and importantly for d c it. The legislation rule cut pulls out default funds. We must look at this now for default funds as well very quickly on yesterday, how broad is their definition because we're beginning to hear about people who got sustainability or impact investing ? Does that all fit in the same category so beautifully for government to government ? They don't actually give you a definition what they say. They say sg including climate change, and i think that's the point that way should really focus on here is that they clearly think that climate change is a very immediate risk, which is why they're pulling it out for specific consideration. But it's a very broad definition. We're giving these obligations on trustees, walk and asset managers do to help. I think really the importance now of asset management of what asset management companies working with trustees is immense, because there's no way they're going to be able to do this on their own, and they shouldn't. Because, in essence, the asset owners are outsourcing the management of the money to the asset managers, so they absolutely should have very strong stewardship policies voting policies, and they'll have a lot of examples of how they are helping with sustainability. So we first have to consider the fact that there's some education to be done. There'll be different. It trustees at different levels of knowledge, so we can help with the education that we got a bear mind that asset managers have not only expert teams, but also individuals doing stewardship looking just a voting, so it's important to utilize these tools. We can then consider also how to help with some of the policies. What is usual what it's standard is aaron templates that could be used. We can then consider helping in other areas sort of portfolio reviews because sometimes it's not about adding an extra fund. It's about potentially just tweaking some of the investments that already are in existence or creating some overlays. We can help there as well. We can consider also the reporting because ultimately all of this information on the portfolio side is going to have to be reported back in the chairman's statement. So getting that reporting right what is it that they want to see in there ? Chairman statement how could make their lives a lot easier ? And finally, i would say around communication because communication is going to be extremely important when considering default funds on dh we've touched on this before about the emotional connection between investments on dh, also, then making more engagement from the underlying members. On dh i think with this particular subject matter. It's a it's a case of that good governance actually creates riel life, good consequences, which is something that we all want to feel and see with our financial investments. So in summary between now and october, twenty nineteen what should trust to be doing that create their considerations and policies so they've got to think about how they're going to manage that long term risk. How they're going to mitigate it and put in practical plans of action of what that's going to look like allison hatcher. Thank you. Thank you very much. Now for more news and analysis boost is an asset dot tv or following from twitter asset tv. No.